Mahaveer Yadav v. Income Tax Officer, Ward-1 (5), Income Tax Office, Alwar

HIGH COURT OF JUDICATURE FOR RAJASTHAN BENCH AT JAIPUR D.B. Income Tax Appeal No. 238/2018 Mahaveer Yadav S/o Shri Gangadeen, Aged About 74 Years, Vpo-Budhi Bawal, Tehsil- Kotkasim, Alwar ----Appellant Versus Income Tax Officer, Ward-1 (5), Income Tax Office, Alwar ----Respondent For Appellant(s) : Shri Gunjan PathakFor Respondent(s): HON'BLE MR. JUSTICE MOHAMMAD RAFIQ HON'BLE MR. JUSTICE GOVERDHAN BARDHAR 13/08/2018 Judgment This appeal has been filed by assessee-Mahaveer Yadavchallenging the order passed by the Income Tax Appellate Tribunal(for short-`ITAT’) dated 27.02.2018 in his appeal. The Tribunal bythe aforesaid order dismissed the appeal and upheld the orderdated 7.2.2017 passed by the CIT(A), Alwar for the assessmentyear 2011-12. Shri Gunjan Pathak, learned counsel for the appellant-assessee has argued that the learned ITAT has erred in law inconfirming the order of CIT(A) in considering the division of thehuge chunk of 10-11 bigha agricultural land into smaller portionsof agricultural land for easy viability and sale as income frombusiness and profession instead of income under the head capitalgains, even when the appellant had inherited the land from his forefathers and had no intention or a previous track record ofbeing into the business of purchase and sale of properties. It is contended that the learned ITAT has erred in confirmingthe receipt sale of agricultural land as income from business andprofession, whereas the appellant had subdivided the agriculturalland only because the sale of the huge chunk was not viable andfor that purpose, he had to build/develop the approach road tosuch portions of land. The Assessing Authority has erred in law inconfirming the order passed by the Assessing Officer / CIT (A)without taking into consideration the factors for determining thecharacter of the isolated transactions as income from capital gainsor business and profession. Learned counsel in support of hisarguments has relied on the judgement of the Supreme CourtG.Venkataswami Naidu & Co. vs. CIT-(1959) 35 ITR 594 (SC) andjudgements of various High Courts viz. CIT vs. Sohan Khan-(2008) 304 ITR 0194 (Raj.), CIT vs. Suresh Chand Goyal-(2008)298 ITR 0277 (MP), CIT vs. A.Mohammed Mohideen-(1989) 176ITR 0393 (Mad.), CIT vs. MLM Mahalingam Chettiar-(1977) 107ITR 0236 (Chennai), CIT vs. Shashi Kumar Agrawal-(1992) 195ITR 0767 (All.) and submitted that the appellant had no intentionto enter into any kind of adventure in the nature trade orcommerce and sold his share in the agricultural land to earnmaximum profits only. The land sold by the appellant is in thenature of capital asset acquired by him as inheritance on thedemise of his father and is not held by him as stock in trade. We have heard learned counsel for the appellant and perusedthe material on record. The Tribunal dismissed the appeal upholding the findingsrecorded by the Assessing Officer as also the CIT(A) that the We have heard learned counsel for the appellant and perusedthe material on record. The Tribunal dismissed the appeal upholding the findingsrecorded by the Assessing Officer as also the CIT(A) that the assessee has developed his share of agricultural land into 34residential plots and sold them to various purchasers as residentialplots and stamp duty has also been paid on conveyance deed soexecuted and further that the plot size ranges from 900 sq. ft. to2964 sq. ft. of the individual residential plots of lands and that thedevelopment of course took place about 12 months ago. TheTribunal has also taken note of the findings recorded by theAssessing Officer that assessee has developed agricultural landinto 34 small plots, developed access road within the plotted landand sold to individual purchasers as residential plots over a periodof three years. As per assessee’s own submissions dated23.3.2015, it has been stated by the assessee before the AO that“the development of plots took about 12 months and completed atthe end of Financial Year 2009 and gravel road developed.” TheTribunal took note of the fact that there was a report of theInspector on record, who visited the site on 19.3.2015 and hasgiven a finding that about 40-50 residential plots have alreadybeen built where people are staying, roads have been laid down, ahospital by name of Shyam Hospital is running, a school by thename of little star school is also running on one of the plots andthe whole area has been developed as a residential colony. TheTribunal noted that stamp duty authorities have also recognisedthe plotting as residential plots, which is evident from theregistered sale deeds and the stamp duty paid on such sale ofresidential plots. It was therefore held that all these facts takentogether shows clearly that the assessee has taken affirmativesteps and actions where he has converted his agricultural land intoresidential stock-in-trade of his business of selling the plots of landfor earning profit. The very nature and purpose of the agriculture land has beenchanged and the Tribunal therefore upheld the findings recordedby the CIT(A) that such change is an irreversible change wherethe very nature and purpose of the land has been changed fromagriculture to residential. The Tribunal held that it is not a casethat the buyers have acquired agriculture plots and subsequentlychanged it to residential use. In this case, the assessee itself hasdeveloped residential plots and then sold it to individual buyers.The findings recorded by the AO that by such plotting of land, theagriculture land has been converted into stock-in-trade ofassessee’s business, was thus upheld by the CIT(A) and affirmedby the ITAT. The development of residential colony and saidconversion has happened by the assessee’s own admission duringfinancial year 2009. The fair market value of the asset on the dateof conversion as reduced by the cost of acquisition is required tobe assessed under the head “capital gain” in the year the stock-in-trade is sold/transferred. The sales realization of the stock-in-trade over such fair market value is required to be assessed as“business income”. During the year under consideration, 15 plotswere sold for consideration of Rs.54,93,100. Therefore, thetaxability arising on conversion of agricultural land into stock-in-trade to the extent it has been sold during the impugnedassessment year. The learned Tribunal in arriving on the aforesaidconclusion has relied on judgement of the Supreme Court in Smt.Sarifabibi Mohmed Ibrahim vs. CIT-(1993) 204 ITR 631 (SC). In view of the concurrent factual finding recorded by theAssessing Officer, CIT(A) and ITAT, in our view, no question of lawmuch less any substantial question of law does arise forconsideration by this Court. Tribunal is the final fact finding In view of the concurrent factual finding recorded by theAssessing Officer, CIT(A) and ITAT, in our view, no question of lawmuch less any substantial question of law does arise forconsideration by this Court. Tribunal is the final fact finding authority on the subject. We may in this connection refer tojudgement of the Supreme Court in Vijay Kumar Talwar vs.CIT(A)-(2011) 1 SCC 673 wherein the Supreme Court noted thatthe High Court refused to interfere with the order of Tribunalholding that no substantial question of law is involved. TheSupreme Court held that the conclusion of the Tribunal to theeffect that the assessee has failed to prove the source of the cashcredits cannot be said to be perverse, giving rise to a substantialquestion of law. The Tribunal being a final fact finding authority, inthe absence of demonstrated perversity in its finding, interferencetherewith by this Court is not warranted. In the result, the appeal is dismissed. (GOVERDHAN BARDHAR),J (MOHAMMAD RAFIQ),J RS/22